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Lesson Transcript

Kellie: Hello and welcome back to EnglishClass101.com. I’m your host Kellie.
Gina: And I’m Gina.
Kellie: This is Culture Class, Season 2, Lesson 20 - The Top 5 most influential events in British Finance.
Gina: Yes, these are the events that shaped the financial world that we know and operate in today.

Lesson focus

Kellie: We’ll start, as always, at number 5. Number 5 is the industrial revolution.
Gina: Of course, we talked about this during our lessons on British manufacturing. It was a highly influential event that influenced many different areas. In fact, finance was just one of those areas.
Kellie: So how exactly did it influence finance?
Gina: It led to a rapid growth in production that the rest of the world couldn’t match at that time. It gave Britain the edge and helped the country lead the world economy for most of the 19th century.
Kellie: I suppose it brought a lot of money into Britain.
Gina: It did, and the increase in revenues required better ways to manage them. Many banks and financial services companies either began during this time or were able to rapidly expand. Also, London quickly became the world’s finance capital and arguably, it still is.
Kellie: The economy and finance world had to try and keep up with the manufacturing industry.
Gina: Yes, they did.
Kellie: I think number 4 is quite tightly linked to number five and the Industrial Revolution.
Gina: Oh? What is number 4?
Kellie: It’s the British Empire and free trade.
Gina: Oh, definitely linked! First, let’s give a quick history lesson on the British Empire. The Empire was the collective name for all of the territories and colonies that were under British rule and governance.
Kellie: It was the largest empire in history and covered nearly a quarter of the earth’s land mass and one-fifth of the population.
Gina: It helped Britain establish trade routes all over the globe and thanks to the Industrial Revolution, Britain was manufacturing goods so efficiently and cheaply that they could undercut even local sellers.
Kellie: And this was free trade, wasn’t it? There were no duties to pay between members of the Empire.
Gina: None at all. Even in countries that weren’t part of the Empire, Britain could dominate their economy because of their goods. It wasn’t all plain sailing for Britain though.
Kellie: Why not?
Gina: Some of the colonies and territories cost more money to maintain than they brought into Britain.
Kellie: So they were running at a loss?
Gina: In essence. However, the strength of Britain’s trade meant that they didn’t need the colonies as much anymore. They could still make money out of those countries simply by selling them goods.
Kellie: So they cut some countries loose.
Gina: Canada and Australia first.
Kellie: Is that so? Thank you! So number 3 is the establishment of the City of London.
Gina: This is also linked to numbers 4 and 5.
Kellie: This is a well planned lesson.
Gina: Of course it is! Trivia time – how many people live in the City of London?
Kellie: Around eight million I think.
Gina: Wrong. It’s closer to 7,000 people.
Kellie: What? No it isn’t…. (pause). Ohhh, I get it. The actual City of London is tiny, isn’t it?
Gina: Yes, the City of London is inside London. London itself has just over eight million inhabitants but the City of London is a small city that is around one square mile and it only has 7,000 people living there. It’s the finance district of Britain.
Kellie: You tricked me.
Gina: You fell for it! In the 19th century, the City of London established itself as a finance centre and became the world’s finance centre as most foreign trading took place within the City. It helped Britain control the world’s economy and gave Britain the strong financial base it still has.
Kellie: It’s a pretty unique place and still a major finance hub.
Gina: Yeah. There are 500 different banks with offices within that square mile and around 47% of trade on foreign markets still happens with the City.
Kellie: No more trick questions now.
Gina: Okay, I promise!
Kellie: Number 2 is the formation of the EU.
Gina: We had the British Empire at number 4 and although the EU is also a grouping of countries under one banner, it’s a very different animal.
Kellie: True. The EU began in 1957 when 6 countries formed the European Economic Community and signed the Treaty of Rome.
Gina: Britain wasn’t one of those countries. Britain didn’t link up with the European Communities, as it was later known, until 1973.
Kellie: Its main purpose then was as a customs union which allowed for free trade between member countries without the need for taxation and additional fees. Import quotas or governmental fees for example don’t exist.
Gina: The European Union, the EU, as we know it now came to life on 1st November 1993 with the signing of the Maastricht Treaty. This Treaty paved the way for the Euro, but although Britain didn’t adopt the Euro she was still able to sign the treaty.
Kellie: The ease of movement between the member countries is really important for businesses.
Gina: It’s far easier to have offices in different European countries than it once was. And Europe has a louder voice on the world stage than any of its member countries would have alone. 23% of the world’s nominal income was generated in the EU in 2012 from only 7% of the population.
Kellie: And our number 1 is very tightly linked to the EU. It’s keeping the pound.
Gina: Of the 28 member states of the EU, 11 of them have adopted the Euro. Britain, of course, hasn’t.
Kellie: We kept the British pound, pound sterling.
Gina: It’s the oldest currency currently used in the world as it can be traced back to Anglo-Saxon days.
Kellie: Why didn’t Britain adopt the Euro when so many other countries did?
Gina: The Labour government, who was in power at the time, devised five economic tests that Britain would need to pass before the Euro could be joined. These tests mainly assessed the compatibility of Britain’s economy with that of Euro.
Kellie: Britain didn’t pass the tests then?
Gina: No. The Labour government assessed the tests again a couple of times but after they lost power in 2010 the tests were ignored. The current government of the Tories and the Liberal Democrats have ruled out the chances of joining while they were on power.
Kellie: The Euro isn’t popular with the British public, is it?
Gina: Not really. Recent polls suggest 85% would vote against adopting the Euro if a referendum was held.
Kellie: Would the Euro help Britain?
Gina: The experts are divided on that. The British pound, or the sterling as it is more commonly known, is still a strong currency. It is the fourth most traded currency in the world and the third most held in reserve by foreign banks as securities on loans and local currency.
Kellie: Well, that’s all we have time for in this lesson.


Gina: See you next time.
Kellie: Bye!

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Hi Listeners! Is there anything you would like to add about these important events?